Archive for the ‘Mortgages’ Category
Banks to Benefit Most From White House Effort to Fight Foreclosures
August 15th, 2010 | 
Author: Banks will get the biggest benefit from an Obama administration housing program designed to help unemployed homeowners escape foreclosure.
Housing experts expressed concern that banks, not homeowners, will be helped by the White House’s $3 billion funding infusion — $2 billion from the Treasury Department and another $1 billion from the Housing and Urban Development Department — going to those states hit hardest by the housing market crash and unemployment.
“Giving money to the banks isn’t what the government should be doing right now,” said Dean Baker, co-founder of the Center for Economic and Policy Research.
“I’m not a big fan; it’s ill-conceived,” he said.
The basic principle is to help struggling homeowners but with so many people underwater on their mortgages the new funding is unlikely to do much good, Baker said.
“You need to make sure that someone benefits from the program other than banks,” he said.
Baker suggested that if the government is going to provide up to $50,000 in loans over the course of two years to those struggling homeowners that the money should be used for any of their needs, not just to pay the mortgage.
He said banks could offer a program that would allow homeowners to rent their home back from the bank at a lower monthly rate than their mortgage payment for up to five years, providing some security for those struggling to make monthly payments.
The arrangement would provide lenders with a real incentive to negotiate with homeowners because they don’t want to be landlords.
If the recently announced program is expected to work there has to be a reasonable expectation that at the end of the two-year program homeowners will have some equity in their property.
“If that’s not the case, then it’s not worth it,” he said.
He said he’d be “very surprised” if the vast majority of those who take advantage of the program don’t eventually lose their homes.
Foreclosures were up 4 percent in July with 325,229 filings, a nearly 10 percent increase over the same month in 2009, according to a report from RealtyTrac, a group that tracks foreclosure filings.
David Abromowitz, senior fellow at the Center for American Progress, said the main problem with the funding is that lenders will benefit without requiring any concessions or matching of the federal aid.
“My concern is what are we asking from lenders who are going to get the benefits source to pay those loans for 24 months,” he said.
Under the program, lenders don’t have to make principle reductions on loans or major modifications, he said. Lenders should also be required to make concessions and possibly even match funding.
“Banks also should be required to share in the burden being faced by homeowners,” he said.
Despite his reservations with the funding, he emphasized that with millions facing foreclosure, the fragile economy and a slowing economic recovery, “anything that slows or stops foreclosures is good.”
“It’s targeted well toward people facing a temporary situation when they can’t pay their mortgage because of unemployment,” he said.
Still, the challenge is difficult as federal officials try to find ways to get the economy to turn the corner and pick up pace.
“No one piece is going to turn the tide,” Abromowitz said. “But this certainly could help in the housing market.”
Under the federal program, Treasury will direct the $2 billion to the “Hardest Hit Fund” created earlier this year, while HUD will create a new “Emergency Homeowners Loan Program” that will provide zero-interest loans of up to $50,000 for two years. The funding will be divided up among 17 states and the District of Columbia.
The funding allocation announced last week is the third payout for the housing program, pushing the cost of the program to $4.1 billion.
Nevada, Arizona and Florida posted the worst foreclosure rates in July, with Nevada reporting the nation’s highest foreclosure rate for the 43rd straight month.
Five states accounted for more than 50 percent of national total — California, Florida, Illinois, Michigan and Arizona.
Four of those states will get part of $3 billion from the Treasury and Housing and Urban Development Department to help unemployed homeowners stave off foreclosure.
At $476 million, California gets the largest share while Florida will receive about $239 million, Illinois gets $166 million, Michigan $129 million and Nevada is set to receive $34 million under the program.
John Weicher, director of the Center for Housing and Financial Markets at the Hudson Institute, said “the most important thing is the strengthening of the economy overall.”
“What’s happened so far hasn’t been very helpful,” he said about the administration’s past efforts.
The Obama administration had tried several different avenues to stem foreclosures but hasn’t made much headway. About 530,000 homeowners, or more than 40 percent, have dropped out of the Making Home Affordable program.
“There’s an open question of whether this will work particularly well,” Weicher said.
He said maybe just getting money to people to help them make their mortgage payments may be more successful than other programs.
Republicans have argued that it puts taxpayer money at risk, and the special inspector general for the $700 billion Troubled Asset Relief Program is auditing the program.
“It’s troubling that just weeks after the SIGTARP assailed the administration for its lack of success and transparency in managing their signature mortgage-relief program, they have ignored the IG’s warnings and are committing even more money in a failed program that ultimately isn’t helping those who need it the most,” Rep. Darrell Issa (R-Calif.) told The Hill.
Issa, ranking member on the House Oversight and Government Reform Committee, said “if the administration were serious about helping the jobless keep their homes, they would be advancing policies that would create jobs and address the root causes of the housing crisis – Fannie Mae and Freddie Mac.”
Posted in Banks, Corruption, Economic Crisis, Economy, Financial System, Foreclosures, Fraud, Government, Housing, Money, Mortgages | 
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The Immediate Future of the Housing & Mortgage Markets – One Man’s View
I am a Loan Officer for a national mortgage bank – yes, I am one of those horrible bankers who forced people to take out mortgages they did not understand on homes they could not afford. Actually, I have been a loan officer for 5 years, so I started after those OTHER horrible bankers had done all those bad things to poor unsuspecting people.
At any rate, I get asked often if now is a good time to buy a home.
My answer? There has probably never been a better time to buy a home. Home prices are low, and interest rates are about as low as they have ever been. It is a Buyer’s market, and you can get a great deal on a home.
That said, there is a caveat or two. You have to have decent credit (decent, not great), a job, and you have to have some money (unless you are an Armed Services veteran, there are no more 100% loans), and you cannot have too much other long term debt (long term debt is car loans, other consumer loans, student loans, mortgages and credit card debt).
There can be issues with getting approved if you are self-employed or if you are new to a job or career field, but for the most part, loans are available, and not just for the people with great credit and 20% to use as a down payment.
In addition, you should be relatively secure in your employment situation. I know there is no guarantee that anyone will keep their jobs, especially these days. Buying a home is a large commitment, so if you have an unusual amount of job or financial anxiety, wait to buy until things improve. Peace of mind is a hard thing to lose.
So, given the current good market for buying, what does the future hold for the housing and mortgage market? If I knew for sure, I would be on my yacht sipping umbrella drinks and wondering what to snack on next, but I can make some informed predictions. I call these types of predictions SWAG’s (scientific wild-ass guesses).
My view of the future is predicated on the following assumptions. Until something changes dramatically, these things are and will continue to be true.
- Government spending and the associated deficits will continue to be HUGE – even if the Republicans take over Congress in the next election, it will be many months or several years before anything changes with government spending – this is not want I want, this is reality. Nothing changes quickly in DC.
- Taxes will rise – a lot. This is a sure thing. The tax cuts that President Bush got passed on 2001-2002 expire at the end of 2010, so taxes will go up. Add to that the new healthcare bill and other “stimulus” measures coming out of Washington, and you can expect a BIG increase in your taxes.
- The economic doldrums will continue – the decisions and spending by our federal government are exactly opposite what was/is needed to get the economy pumped up. Think I’m wrong? Check out what happened in Japan in the 90’s and see what their government did to “fix” it. They did exactly what Washington is doing, and we are going to get the same result – a decade or more of no grow, at all.
All this means that the housing and mortgage markets will be adversely affected. I expect the following:
- Interest rates will remain low for the remainder of 2010. Then, depending on what happens in the Nov. election, and what course the new Congress takes, rates will rise – maybe a lot. I would not be surprised if mortgage interest rates were at or near 10% in 12-18 months. Why will they rise? The Treasury department artificially “made the market” for mortgage interest rates by buying LOTS (over $1 trillion) of mortgage-backed securities, starting in Dec of ’08. This program stopped at the end of the 1st quarter this year Government deficit spending. Right now, other countries ate financing our spending by buying Treasury bonds – at very low rates (near 0% returns). That will NOT continue. When the countries & investors buying our debt stop doing so, the return will have to rise to get them to buy (good old supply & demand). So, the Federal Reserve will have to raise rates to sell the bonds, and that will make rates in all other things rise as well. In addition, I think we are headed for rapid inflation, and the Fed will fight that by raising interest rates. This could happen very quickly – in a matter of weeks. I watched rates go up 2+% in a few weeks in 2005, and down 2+% at the end of 2008.
- Home Values will NOT recover – not in the next couple of years. There is not enough demand for homes to warrant an increase – except in some very specific towns & neighborhoods. People are anxious about their livelihoods and the economy and government spending, and that is not going to change until several things change 180 degrees.
All this tells me that the next year or so are not going to be perceptively better than now – and got get worse.
I hope I am wrong. I hope (and am working personally to see it happens) that there are substantial changes in Washington as a result of the November election. I hope that the new Congress will see the light and go after government spending with a blow torch, especially that horrible health care “reform”, without more taxes hikes than we will have anyway (those Bush tax cuts expiring). I hope that they make major changes to entitlement spending (Social Security, Medicare, Medicaid) that get those runaway programs under control. I hope all these things, and I am working in my small way to help make them happen, but until they do, no one can assume they will. The old saying applies – “Hope for the best, plan for the worst.”
OK, mortgage rates are low and probably going up soon. Home prices are down and probably not going up anytime soon. The federal government is filled with thieves, charlatans, mountebanks, and failed lawyers (basically the same thing, huh?) , and that will probably never change.
What are you going to do? Do like I did. I own a home and have refinanced to a rate in the mid-4%. If I had some money, I would buy rental properties and/or a vacation home, but alas I do not have the funds for that. Buy a home if you can and want to; refinance your mortgage if you have not done so yet. These things will help you and will help the economy. Then, go vote for conservatives in November and force them to do as they are told.
Contact me if you want more info about anything I have written here.
Posted in Economy, Housing, Mortgage Industry, Mortgage market, Mortgages, housing market |
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Is MERS About To Unravel?
Is the title to your property held by MERS (Mortgage Electronic Registration Systems)? It’s in your best interest to find out.
One has to wonder, given this…
The United States Bankruptcy Court for the Eastern District of California has issued a ruling dated May 20, 2010 in the matter of In Re: Walker, Case No. 10-21656-E-11 which found that MERS could not, as a matter of law, have transferred the note to Citibank from the original lender, Bayrock Mortgage Corp. The Court’s opinion is headlined stating that MERS and Citibank are not the real parties in interest.
The court found that MERS acted “only as a nominee” for Bayrock under the Deed of Trust and there was no evidence that the note was transferred. The opinion also provides that “several courts have acknowledged that MERS is not the owner of the underlying note and therefore could not transfer the note, the beneficial interest in the deed of trust, or foreclose on the property secured by the deed”, citing the well-known cases of In Re Vargas (California Bankruptcy Court), Landmark v. Kesler (Kansas decision as to lack of authority of MERS), LaSalle Bank v. Lamy (New York), and In Re Foreclosure Cases (the “Boyko” decision from Ohio Federal Court).
Indeed.
I have noted this repeatedly – that MERS own web site claims that it is exists for the purpose of circumventing assignments and documenting ownership!
MERS is an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked. Created by the real estate finance industry, MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans.
Sorry, but “creating a real estate finance industry device” does not obviate state law, no matter how much you might wish it did.
From the opinion cited:
The opinion states: “Since no evidence of MERS’ ownership of the underlying note has been offered, and other courts have concluded that MERS does not own the underlying notes, this court is convinced that MERS had no interest it could transfer to Citibank. Since MERS did not own the underlying note, it could not transfer the beneficial interest of the Deed of Trust to another. Any attempt to transfer the beneficial interest of a trust deed without ownership of the underlying note is void under California law.”
Looks pretty basic to me: You can’t transfer what you don’t have, and creating a database for tracking purposes does not create an ownership interest.
As I noted in “And The Housing Fraud Continues” on May 31st there are plenty of reasons to doubt whether or not any of these notes are recoverable.
But whether something is difficult to unwind and put right legally doesn’t have a thing to do with whether or not a note is legally enforceable. It either is or it is not.
When will we see Attorney General Holder open a criminal investigation into this matter? Is there not sufficient question as to whether or not the very existence of these so-called “transfer systems” evidences an enterprise between multiple parties formed for the very purpose of circumventing state law, and that such systems, inherently being formed and operated in interstate commerce, are certainly within the realm of Federal Government jurisdiction.
There are many who will argue that this is “just” a civil matter. I disagree. The intentional creation of these devices as an enabler to alleged value where none exists is not a civil matter. Nor is creating securities where one represents that a particular interest exists for the purchaser, when in fact it does not.
Wake up America – and if the United States AG will not act, then the State Attorneys General must.
In the meantime if you are facing a foreclosure and MERS was involved in some fashion, either in assignment of the paper just before the suit was filed or worse, in bringing the suit itself, you need competent legal advice right now.
You may be able to stop the foreclosure dead in its tracks.
Posted in Banks, Corruption, Financial System, Foreclosures, Fraud, MERS, Mortgage Fraud, Mortgage Loans, Mortgages |
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A Disturbing Pattern? (Bank Loans / Helocs)
A Disturbing Pattern? (Bank Loans / Helocs)
Posted by Karl Denninger
In conjunction with what I wrote on this morning, the potential for massive hidden losses in our banks, I keep getting the following sort of anecdotal reports, all in relationship to the banking giants.
“My property foreclosed in <bubble state> and <Big Bank X> had written a $200,000 HELOC, which was drawn down. The first lender foreclosed and is holding the property in inventory (it is not listed.)
<Big Bank X> reported the account as charged off in my credit report, but has a notation that “debtor has an arrangement to make partial payments.”
I have not even spoken with <Big Bank X>.
Then there’s stuff like this from the forum:
“My home in CA was purchased for $685k in May 2006. Because of 14 months of unemployment, a mortgage payment hasn’t been made in months. Mortgage holder just had the property appraised and the value came in at $319k. After the appraisal was completed, I was told by the mortgage holder not to worry about foreclosure proceedings beginning. I’ve also been told by the mortgage holder that they have “many” internal plans for modifying loans and that they would continue to work with me until we found a suitable “solution” enabling payments to resume.”
That’s the general gist of these emails. Another said that they were “offered” payments on a massively-delinquent first that were well under 1% on an interest-only basis. Like under $100/month on a loan that should have even an I/O payment of several times that amount.
The obvious question is whether these “charged off” and “How about you pay us $50/month, which is a tiny fraction of even an I/O payment” loans are being manipulated so that they can be considered performing assets on these bank balance sheets.
And if that is the case, then the obvious next question is how many of these loans are there, and what sort of material misstatement does this all add up to when one looks at these balance sheets as a whole?
If I had received one or two of these sorts of anecdotes over the last year or so I wouldn’t be so alarmed. But that’s not what’s happened. Instead, I’ve received a bunch of these over the last few months and I suspect I’ll get even more now that I’m “outing” that I’m getting these emails on a regular basis.
Unfortunately I can’t verify any of this since I can’t pull someone’s credit - but why would borrowers send me these sorts of claims if they weren’t true?
If they are true then the obvious question is whether the sort of “Repo 105″ deal Lehman was running is just a tiny bit of the balance sheet fraud that is going on in these big banks?
Folks, this sort of thing makes no sense. Reporting payments that aren’t being made to credit bureaus in the “comments” field (while showing “charged off”) has no probative value for the bank – unless it’s to please an auditor or government official who is questioning whether that loan is in some way “performing” and/or has some sort of recovery value, thereby supporting an intentionally-false mark!
Folks, this whole cesspool stinks like dead fish, and the disclosure of what Lehman was up to makes clear that the banks believe they can pretty much do whatever they want when it comes to balance sheets and get away with it – provided they can find someone will will give them an opinion that its legal (even if the “someone” isn’t in the US!)
Posted in Banks, Corruption, Economic Crisis, Economy, Financial System, Home Equity, Mortgages |
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Buy Financials (Because I Was Right)
Buy Financials (Because I Was Right)
Posted by Karl Denninger
The mortgage firms are looking at every loan more than 90 days past due and “asking us basically to give them all the documentation to show that it was properly underwritten,” JPMorgan’s Scharf said. “We then go through a process with them that takes a period of time, and literally it’s every loan, loan-by-loan, and have the discussion on whether or not we actually should buy the loan back.”
That’s exactly what I said would happen more than two years ago.
EVERY LOAN.
If there was appraisal fraud OR
If there was income fraud OR
If there was DTI fraud OR
If the automated underwriting was gamed OR
If there was asset fraud
THEN the bank gets rammed with a repurchase demand on the bad paper – paper that is 90 days+ and, in essentially every case, dramatically underwater.
The “dream” that this will result in “only” $7 billion in losses (30% of the repurchased amount) is a fantasy.
The most common include inflated appraisals or falsely stated incomes in the loan applications, said Larry Platt, a Washington-based partner at law firm K&L Gates LLP who specializes in mortgage-purchase agreements. The government agencies hire their own reviewers who go back and compare the appraisals with prices from historical home sales, he said.
Ding ding ding ding ding ding.
The truly ugly news isn’t found in these mortgages. It is found in the second lines – HELOCs and “Silent Seconds” – that are behind these agency mortgages. Those are worth zero once the first defaults, and when the repurchase demand is perfected the auditors are going to force these loans to be recorded at their likely recovery value – which is zero.
There are literal hundreds of billions of dollars worth of that trash on all of the big banks balance sheets, and all of it is being carried under assumptions that nearly every one of those loans is “money good.” 80% of the dollar value of these HELOCs and Seconds are in the bubble areas and of those virtually all are behind an underwater first.
The assumption that these loans are “money good” is blatantly and intentionally false. It is a fiction that our regulators, examiners and auditors have foisted upon the public, and if you rely on it, you will get burned.
Oh, JP Morgan’s net income for all of 2009? $11.7 billion.
They recorded $1.6 billion last year for this “expense”, and I’m willing to bet that it’s double that or more for the coming year, not to mention the impairment or outright write-off of the seconds.
That would be roughly 20% of their net earnings – not exactly an immaterial amount of money.
PS: $21 billion is tiny compared to the tsunami headed these folks’ direction. In the end every piece of this bad paper is going to head back to the securitizers and originators. All of it – and the seconds behind that paper are all going to wind up marked to zero, because they are subordinate to an underwater first. It is simply a matter of time before the people who hold these RMBS and the more complex securities structured on top of them decide to come after the banks and, to the extent that they can prove malfeasance or misfeasance, these banks will eat it.
Posted in Banks, Corruption, Economic Crisis, Economy, Financial System, Mortgage-Backed Securities, Mortgages, RMBS |
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Rising FHA Default Rate Foreshadows a Crush of Foreclosures
Rising FHA Default Rate Foreshadows a Crush of Foreclosures
Washington Post Staff Writer
Tuesday, February 2, 2010
The share of borrowers who are falling seriously behind on loans backed by the Federal Housing Administration jumped by more than a third in the past year, foreshadowing a crush of foreclosures that could further buffet an agency vital to the housing market’s recovery.
About 9.1 percent of FHA borrowers had missed at least three payments as of December, up from 6.5 percent a year ago, the agency’s figures show.
Although the FHA’s default rate has been climbing for months and eating into the agency’s cash, the latest figures show that the FHA’s woes are getting worse even as the housing market shows signs of improvement. The problems are rooted in FHA mortgages made in 2007 and 2008. Those loans are now maturing into their worst years because failures most often occur two to three years after a mortgage is made.
If the trend continues and the FHA’s cash reserves are exhausted, the federal government would automatically use taxpayer money to cover the losses — a first for the agency, which has always used the fees it charges borrowers to pay for its losses.
As these loans from 2007 and 2008 go bad and clear off of the FHA’s books, agency officials said, losses are expected to taper off, aided by the housing market’s anticipated recovery and an influx of more creditworthy borrowers, who have flocked to the FHA’s home-buying program in the past year.
Agency officials said they have cracked down on poorly performing lenders and announced higher qualifying fees for borrowers. On Monday, the agency projected that the fees should generate $5.8 billion in fiscal 2011, up from $2 billion this year. That would fatten the FHA’s cash cushion, used to cover unexpected losses.
Beleaguered books
For now, just about every major measure of the agency’s financial health is worsening.
The FHA does not make loans but insures lenders against losses. And claims have already spiked. The agency had to pay out on 47 percent more loans in October and November than in the corresponding period a year earlier, according to an FHA report.
The number of loans in foreclosure, including those that have not yet been billed to the agency, has also increased. They were up 26 percent in the last quarter from a year earlier.
FHA Commissioner David H. Stevens, who joined the agency in July, flagged his agency’s troubles with the 2007 and 2008 loans in October, when he told a House panel that “rogue players on the margin” immediately migrated to the world of FHA lending after the subprime mortgage market collapsed.
Their aggressive lending tactics attracted borrowers with unusually poor credit profiles to the FHA. “That clearly impacted the books of business in 2007 and 2008, and that performance data is showing up very clearly in today’s balance sheet,” Stevens said at the time.
Plunging home prices have exacerbated matters by leaving some FHA borrowers unable to sell or refinance their homes because they owe more than their homes are worth. Yet with unemployment running high, many borrowers can’t afford to keep up their payments.
Adding to the trouble was a now-defunct FHA program that enabled sellers to cover the down payments of buyers. This meant many borrowers had no skin in the game and were more likely to walk away at early signs of trouble. The program resulted in excessive defaults before it was ended in late 2008, and it is projected to cost FHA an additional $10.5 billion in losses, Stevens said.
For all these reasons, the FHA projects that it will pay out claims to lenders on one out of every four loans made in 2007 — the worst rate in at least three decades. The claim rate should be nearly the same on the vastly larger volume of loans made in 2008.
Better borrowers
But agency officials said they have reasons to be optimistic.
The FHA-backed loans made in 2009 tended to go to borrowers with higher credit scores than in previous years. These borrowers turned to the FHA when the mortgage market collapsed and other lending sources dried up. By then, reputable lenders doing business with the agency were already imposing tougher restrictions on FHA borrowers, further boosting the credit profile of those loans. The average credit score of an FHA borrower is now 690, up from 630 only two years ago, agency officials said.
These higher-quality loans are expected to result in lower losses, so the agency should make money on loans issued this year and over the next few years, according to an independent audit designed to gauge the agency’s health.
The audit, released in November, found that the cash the FHA set aside to pay for unexpected losses had dipped to historic lows, well below the level required by law. As of Sept. 30, those reserves were estimated at $3.6 billion, down from nearly $13 billion a year earlier. The most recent figure represents 0.53 percent of the value of all FHA single-family-home loans — far lower than the 2 percent required by Congress.
But Ann Schnare, a former Freddie Mac official, said the situation could be even worse. She said the audit underestimates future losses because it does not take into account all loans that are now overdue, only those that the FHA has paid claims on.
Stevens said his agency has pored over its data to analyze risk and is taking steps to shore up its financial health. “You have a limited set of options under these circumstances: Raise fees [for borrowers] or make policy changes,” Stevens said in an interview. “We’ve done both.”
The agency banned 268 lenders from making FHA loans last year, more than double the total terminated in the previous eight years. The FHA suspended six other firms. Among them were some of the largest FHA lenders — Taylor, Bean & Whitaker and Lend America, both of which shut their doors soon thereafter.
The agency also proposed a rule that would require banks to hold up to $2.5 million in capital that they can use to repay the agency for losses if they were involved in fraud. Banks are now required to hold only $250,000.
Borrowers are also facing tougher scrutiny from the agency. People taking out FHA loans will have to pay higher upfront fees, perhaps as early as this spring. Those with especially weak credit scores will also have to put down at least 10 percent instead of the usual 3.5 percent down payment. The amount of money sellers can kick in toward closing costs and other fees will also be limited.
Posted in Economic Crisis, Economy, FHA, Financial System, Mortgage Loans, Mortgages |
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